Exhibit 10.23
THIRD LOAN MODIFICATION AGREEMENT
This Third Loan Modification Agreement is entered into as of March 30,
1999, effective as of February 7, 1999, by and between BLUESTONE SOFTWARE, INC.,
a Delaware corporation with its principal place of business at 0000 Xxxxxx Xxxx,
Xxxxx Xxxxxx, Xxx Xxxxxx 00000-0000 ("Borrower") and SILICON VALLEY BANK, a
California-chartered bank ("Bank"), with its principal place of business at 0000
Xxxxxx Xxxxx, Xxxxx Xxxxx, XX 00000 and with a loan production office located at
Wellesley Office Park, 00 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000, doing
business under the name "Silicon Valley East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan
arrangement dated as of December 8, 1997, evidenced by, among other documents, a
certain Loan and Security Agreement dated as of December 8, 1997 between
Borrower and Bank, as amended by a First Loan Modification Agreement dated as of
August 16, 1998, and as amended by a Second Loan Modification Agreement dated as
of January 21, 1999 (as amended, the "Loan Agreement"). The Loan Agreement
established in favor of the Borrower: (i) a revolving line of credit in the
maximum principal amount of One Million Seven Hundred Fifty Thousand Dollars
($1,750,000.00) (the "Committed Revolving Line"), and (ii) an equipment line of
credit in the maximum principal amount of Two Million Dollars ($2,000,000.00)
(the "Committed Equipment Line"). Capitalized terms used but not otherwise
defined herein shall have the same meaning as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness".
2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured by the
Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the "Security Documents").
Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Indebtedness shall be referred to as the "Existing
Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. MODIFICATION(S) TO LOAN AGREEMENT.
1. The Committed Revolving Line shall no longer be
capped at $473,365.53. The "Committed Revolving Line"
shall continue to mean a credit extension of up to
One Million Seven Hundred Fifty Thousand Dollars
($1,750,000.00).
2. The Loan Agreement shall be amended by inserting
immediately following the definition of "Negotiable
Collateral" appearing in Section 1.1 thereof the
following definitions:
""Net Revenue" means, as of any applicable
date, the Borrower's gross revenues (as
defined in accordance with GAAP) less
returns, allowances and discounts.
"Net Revenue Requirement" means the
achievement by the Borrower, as of the last
day of each fiscal quarter, of a minimum Net
Revenue of: (i) Three Million Two Hundred
One Thousand Nine Hundred Fifty-Four Dollars
($3,201,954.00) for the quarter ending March
31, 1999; (ii) Four Million Thirty Thousand
Seven Hundred Ten Dollars ($4,030,710.00)
for the quarter ending June 30, 1999; (iii)
Four Million Six Hundred Twenty-Five
Thousand Four Hundred Forty-Two Dollars
($4,625,442.00) for the quarter ending
September 30, 1999; and (iv) Five Million
Seven Hundred
Thirty-Three Thousand Four Hundred
Seventy-Nine Dollars ($5,733,479.00) for the
quarter ending December 31, 1999, and for
each quarter thereafter. Borrower's Net
Revenue calculation for each fiscal quarter
shall be included in the Compliance
Certificate as described in Section 6.3
hereof."
3. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Revolving Maturity Date" shall mean February 7,
1999."
and inserting in lieu thereof the following:
""Revolving Maturity Date" shall mean April 1, 2000."
4. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Subordinated Loan" means a loan between
the Borrower and investors acceptable to the
Bank, which loan shall be expressly
subordinate to the Bank with respect to
amount and security interest and shall be on
terms and conditions acceptable to the Bank
in its sole and absolute discretion."
and inserting in lieu thereof the following:
""Subordinated Loan" means a loan between
the Borrower and certain Investors (as
defined below) dated January 21, 1999,
evidenced by, among other documents, (i) a
certain Convertible Subordinated Secured
Note and Warrant Purchase Agreement dated as
of January 21, 1999, (ii) a certain Security
Agreement dated January 21, 1999, and (iii)
a certain Form of Convertible Subordinated
Secured Note. For purposes hereof
"Investors" shall mean all of the following:
(i) General Electric Capital Corporation,
(ii) The P/A Fund, L.P., (iii) Patricof
Private Investment Club, L.P., (iv) APA
Excelsior IV, L.P., and (v) Xxxxxx & Co.
(Cayman) Ltd., cust. for APA for Excelsior
IV/Offshore, L.P."
5. No further Equipment Advances shall be made under
Section 2.1.2.A. The outstanding principal balance of
all Equipment Advances made pursuant to Section
2.1.2.A, as of March 22, 1999, is Nine Hundred
Fifty-Nine Thousand Eighty-Five Dollars
($959,085.00).
All Equipment Advances currently amortizing under
Section 2.1.2 shall continue to be repaid as provided
in Section 2.1.2. The outstanding principal balance
of all Equipment Advances made pursuant to Section
2.1.2, as of March 22, 1999, is One Hundred
Seventy-Eight Thousand Two Hundred Fourteen and
78/100 Dollars ($178,214.78).
6. The Loan Agreement shall be amended by deleting the
following text appearing as paragraph (a) of Section
2.3 entitled "Interest Rates, Payments, and
Calculations":
"(a) INTEREST RATE. Except as set forth in
Section 2.3(b), any Advances made pursuant
to Section 2.1.1 shall bear interest, on the
average daily
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balance thereof, at a per annum rate equal
to Three Quarters of One percentage point
(0.75%) above the Prime Rate."
and inserting in lieu thereof the following:
"(a) INTEREST RATE. Except as set forth in
Section 2.3(b), any Advances made pursuant
to Section 2.1.1 shall bear interest, on the
average daily balance thereof, at a per
annum rate equal to Three Quarters of One
percentage point (0.75%) above the Prime
Rate. Notwithstanding the foregoing, if the
Borrower fails to achieve the Net Revenue
Requirement for ANY fiscal quarter, any
Advances shall bear interest (except as set
forth in Section 2.3(b)), on an average
daily balance thereof, effective as of the
first day of the month following the quarter
end in which Borrower failed to achieve such
Net Revenue Requirement, at a per annum rate
equal to the aggregate of the Prime Rate,
PLUS One and One-Quarter percent (1.25%).
The effective interest rate shall not
decrease as a result of the compliance by
the Borrower with the Net Revenue
Requirement for subsequent periods."
7. The Loan Agreement shall be amended by deleting the
following text appearing as the second paragraph of
Section 6.3 entitled "Financial Statements, Reports,
Certificates":
"Within fifteen (15) days after the last day
of each month, Borrower shall deliver to
Bank a Borrowing Base Certificate signed by
a Responsible Officer in substantially the
form of EXHIBIT C hereto, together with aged
listings of accounts receivable."
and inserting in lieu thereof the following:
"Borrower shall deliver to Bank, on a
semi-monthly basis within seven (7) business
days of the fifteenth (15th) and last day of
each month, a Borrowing Base Certificate
signed by a Responsible Officer in
substantially the form of EXHIBIT C hereto,
together with aged listings of accounts
receivable. Notwithstanding the foregoing,
if at any time during the preceding month
the outstanding principal balance under the
Committed Revolving Line is no greater than
$1,000,000.00, the Borrowing Base
Certificate and the aged listings of
accounts receivable shall be delivered by
Borrower to Bank within fifteen (15) days of
the last day of each such month."
8. The Loan Agreement shall be amended by deleting the
following text appearing as the fourth paragraph of
Section 6.3 entitled "Financial Statements, Reports,
Certificates":
"Bank shall have a right from time to time
hereafter to audit Borrower's Accounts at
Borrower's expense, provided that such
audits will be conducted no more often than
every six (6) months unless an Event of
Default has occurred and is continuing;
provided however, should the first audit of
Borrower's Accounts be satisfactory to the
Bank, as determined in the sole discretion
of the Bank, such audits will be conducted
no more often than every twelve (12) months
unless an Event of Default has occurred and
is continuing."
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and inserting in lieu thereof the following:
"Bank shall have a right from time to time
hereafter to audit Borrower's Accounts at
Borrower's expense, provided that such
audits will be conducted no more often than
every six (6) months unless an Event of
Default has occurred and is continuing."
9. The Loan Agreement shall be amended by deleting the
following text appearing as Sections 6.8 and 6.9
thereof:
"6.8 TANGIBLE NET WORTH. Borrower shall
maintain, as of the last day of each
calendar month, a Tangible Net Worth of not
less than Three Million Dollars
($3,000,000.00). For purposes hereof,
Tangible Net Worth shall be defined as
Borrower's equity plus Subordinated Debt
less intangible assets.
6.9 ADJUSTED QUICK RATIO. Borrower shall
maintain, as of the last day of each
calendar month, a ratio of Quick Assets to
Current Liabilities of at least 1.25 to
1.0."
and inserting in lieu thereof the following:
"6.8 TANGIBLE NET WORTH. Borrower shall
maintain, as of the last day of each
calendar month, a Tangible Net Worth of not
less than: (i) One Million Seven Hundred
Fifty Thousand Dollars ($1,750,000.00) for
each month through the month ending May 31,
1999, (ii) Three Million Dollars
($3,000,000.00) for the months ending June
30, 1999, July 31, 1999 and August 31, 1999,
and (iii) Four Million Five Hundred Thousand
Dollars ($4,500,000.00) for each month
thereafter. The Bank hereby reserves the
right, in its sole and absolute discretion,
to reset such Tangible Net Worth covenant
upon a public offering of stock by the
Borrower. For purposes hereof, Tangible Net
Worth shall be defined as Borrower's equity
plus Subordinated Debt less intangible
assets.
6.9 ADJUSTED QUICK RATIO. Borrower shall
maintain, as of the last day of each
calendar month, a ratio of Quick Assets to
Current Liabilities of at least 1.50 to
1.0."
10. The aggregate amount of the Subordinated Loan which
remains undrawn by the Borrower, but unconditionally
available to be drawn by the Borrower in immediately
available funds, shall be considered "cash" for
purposes of the Tangible Net Worth covenant appearing
in Section 6.8 and the Adjusted Quick Ratio covenant
appearing in Section 6.9.
11. The Borrower may repay principal and interest amounts
under the Subordinated Loan, PROVIDED that an Event
of Default as defined in the Loan Agreement has not
occurred and is not continuing and would not exist
immediately after such payment.
12. The Borrower hereby ratifies, confirms and reaffirms,
all and singular, the terms and conditions of a
certain Negative Pledge Agreement dated as of August
16, 1998 between Borrower and Bank, and acknowledges,
confirms and agrees that said Negative Pledge
Agreement shall remain in full force and effect.
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13. The Borrowing Base Certificate appearing as EXHIBIT C
to the Loan Agreement is hereby replaced with the
Compliance Certificate attached as EXHIBIT A hereto.
14. The Compliance Certificate appearing as EXHIBIT D to
the Loan Agreement is hereby replaced with the
Compliance Certificate attached as EXHIBIT B hereto.
4. FEE. Borrower shall pay to Bank a modification fee equal to Eight Thousand
Seven Hundred Fifty Dollars ($8,750.00), which fee shall be due on the date
hereof and shall be deemed fully earned as of the date hereof. ADDITIONALLY, IF
BORROWER FAILS TO ACHIEVE THE NET REVENUE REQUIREMENT (AS DEFINED IN THE LOAN
AGREEMENT, AS AMENDED) FOR ANY FISCAL QUARTER, THE BORROWER SHALL PAY TO BANK A
ONE-TIME FEE EQUAL TO FOUR THOUSAND THREE HUNDRED SEVENTY-FIVE DOLLARS
($4,375.00), WHICH FEE SHALL BE DUE ON THE SAME DUE DATE AS THE COMPLIANCE
CERTIFICATE INDICATING BORROWER'S FAILURE TO ACHIEVE SUCH NET REVENUE
REQUIREMENT AS PROVIDED IN SECTION 6.3 HEREOF. THE ABOVE REFERENCED FEE SHALL BE
NON-REFUNDABLE AND DEEMED FULLY EARNED. The Borrower shall also reimburse Bank
for all legal fees and expenses incurred in connection with this amendment to
the Existing Loan Documents.
5. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
6. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Indebtedness.
7. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
defenses against the obligations to pay any amounts under the Indebtedness.
8. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Indebtedness, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Indebtedness pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Indebtedness. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Indebtedness. It is the intention of Bank
and Borrower to retain as liable parties all makers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker will be
released by virtue of this Loan Modification Agreement.
9. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
properties, unconditionally, the non-exclusive jurisdiction of any state or
federal court of competent jurisdiction in the Commonwealth of Massachusetts in
any action, suit, or proceeding of any kind against it which arises out of or by
reason of this Loan Modification Agreement; provided, however, that if for any
reason Bank cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa Xxxxx County, California.
10. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).
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This Loan Modification Agreement is executed as a sealed instrument
under the laws of the Commonwealth of Massachusetts as of the date first written
above.
BORROWER: BANK:
BLUESTONE SOFTWARE, INC. SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: /s/ P. Xxxxx Xxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
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Name: P. Xxxxx Xxxxxx Name: Xxxxxxx X. Xxxxxxx
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Title: President Title: Assistant Vice President
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SILICON VALLEY BANK
By: /s/ Xxxxxxx Xxxxxx
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Name: Xxxxxxx Xxxxxx
---------------------------------
Title: Assistant Vice President
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(signed in Santa Xxxxx County,
California)
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